Value-added tax to be cut to 8 pct from February
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A draft government decree reduces value-added tax on many products and services from the current 10 percent to 8 percent from Feb. 1.
The decree on tax reduction to foster economic recovery approved by the National Assembly will also make expenses on pandemic prevention deductible.
The VAT cut will lead to a loss of some VND49.4 trillion (over $2.1 billion) in revenues, according to the Ministry of Finance.
The deductible expenses will lead to a loss of VND2 trillion.
The lower VAT rate will not apply to telecommunications, information technology, financial activities, banking, securities, insurance, real estate, metal, and prefabricated metal products, mining (excluding coal), coke, refined petroleum, chemicals, and chemical products, and goods and services subject to excise tax.
Questions & Answers
Q.When will the VAT reduction officially come into effect?
When will the VAT reduction officially come into effect?
The draft government decree states that the value-added tax cut from 10 percent to 8 percent will be effective starting from February 1. This change is intended to foster economic recovery.
Q.Which specific sectors will not benefit from the new lower VAT rate?
Which specific sectors will not benefit from the new lower VAT rate?
The lower VAT rate will not apply to telecommunications, financial activities, real estate, and metal products, among others. Goods and services already subject to excise tax are also excluded.
Q.What is the estimated total financial impact of these tax changes on government revenues?
What is the estimated total financial impact of these tax changes on government revenues?
The Ministry of Finance estimates a revenue loss of VND49.4 trillion from the VAT cut. Also, deductible pandemic prevention expenses will lead to a further loss of VND2 trillion.